Public Bill Committee

[Mrs Linda Riordan in the Chair]

New Clause 1  - Accounts and audits

‘(1) Section 15 of the Civil Aviation Act 1982 (Accounts and audit) is amended as follows.
(2) In subsection (1), leave out paragraph (c) and insert—
“(c) to send copies of the statement of accounts to the Secretary of State and the National Audit Office before the end of the November following the accounting year to which the statement relates.”.
(3) In subsection (2), leave out paragraph (a) and insert—
“(a) The National Audit Office shall examine, certify and report on each statement of accounts received under subsection (1) and shall lay copies of the statement of accounts and of its report thereon before each House of Parliament.”.’.—(Jim Fitzpatrick.)

Brought up, and read the First time.

Jim Fitzpatrick: I beg to move, That the clause be read a Second time.
It is a pleasure to see you in the Chair again this afternoon, Mrs Riordan. I am happy to be speaking to the new clause, which is the start of the last leg of the Committee’s discussions—unless, of course, Government Members decide that the expertise and wisdom of my excellent colleagues need to be kept out of the Chamber for another day, in which case they might begin to filibuster, although I doubt that that would be in order.
The new clause is straightforward in that it would introduce oversight of the Civil Aviation Authority’s accounts by the National Audit Office. I will not detain the Committee by reading out the details but, as the amendment paper states, the new clause would amend the Civil Aviation Act 1982 so that copies of statements were sent to the National Audit Office, and provide that the NAO should examine, certify and report on each statement of accounts that it receives.
The new clause outlines clearly that we believe, as does the Select Committee, that it would be useful if the Minister explained why the CAA, uniquely among major economic regulators, is not subject to audit by the National Audit Office. Will she also say why the Bill contains no references to audit or value-for-money arrangements, despite the significant changes to the powers and governance arrangements of the CAA, mentioned by my hon. Friend the Member for Blackley and Broughton when he spoke to previous amendments? Ofgem, Ofwat and Ofcom are all economic regulators and funded by private companies, but will still be subject to National Audit Office oversight. I should be grateful if the Minister explained why the Civil Aviation Authority should be an exception; that seems somewhat anomalous.
In oral evidence to the Select Committee, Dame Deidre Hutton, the chair of the CAA, noted that the NAO had approached the Department for Transport on several occasions about the CAA not being within its remit, although it had not approached her.

Theresa Villiers: The shadow Minister is being generous in allowing me to intervene. The Bill’s view that the CAA does not need to be subjected to NAO scrutiny was reflected in the conclusions of the Pilling review. My understanding is that the hon. Gentleman was aviation Minister when the previous Government responded to that review. Perhaps he will share with the Committee what worries he expressed at the time about the proposal to exempt the CAA from NAO scrutiny.

Jim Fitzpatrick: The right hon. Lady refers back to my time as aviation Minister, which was three years ago; the world has moved on a little in three years. We now have the Bill. As I said earlier, my hon. Friend the Member for Blackley and Broughton said that the CAA has been given additional powers in respect of aviation, and that it will obviously have to have additional staff to deal with those additional powers, which will incur additional costs. When we discuss value for money and new clause 2, which complements the new clause that we are debating, we will argue that the CAA should have a new remit that is appropriate to its new powers.
The world has moved on since we were in government and reached our conclusion, and the Minister has introduced changes in the Bill; it is not exactly the same level playing field as it was a few years ago. It is not inappropriate to suggest that what is proposed for the CAA is anomalous to the position of Ofgem, Ofwat and Ofcom. Even the chair of the CAA said that she had been in touch with the DFT about such matters and that the NAO seemed to consider itself capable of and suitable for conducting audits of the CAA’s activity.
Furthermore, yesterday I received the British Air Transport Association’s view, which I am sure was circulated to other members of the Committee. Dr Barry Humphreys, who gave evidence to the Committee, wanted in particular to raise the matter prior to today’s debate. He referred to the Minister’s evidence that addressed CAA efficiency; she gave evidence on the same day as he did. The Minister noted—this is me quoting Dr Humphreys quoting the Minister, so there are three sets of parentheses—that
“The CAA is already subject to audit and scrutiny… The simple fact is that the CAA is not dealing with public money”—
that is an important point—
“it is dealing with the money of the aviation and airline industry.”
That is the point that my hon. Friend the Member for Blackley and Broughton made when he moved amendment 6 just before the Committee adjourned. The Minister continued:
“The CAA is funded by the industry, and the NAO’s functions are primarily focused on taking account and keeping track of taxpayers’ money... I find it…instructive that, as far as I can see, not one piece of evidence to the Transport Committee mentioned this as an issue of concern to the people affected by the Bill.”––[Official Report, Civil Aviation Public Bill Committee, 23 February 2012; c. 82, Q185.]
Dr Humphreys says:
“The Minister’s statement raises several issues. First, the CAA is indeed subject to audit and scrutiny, just as any company is. However, such audits focus almost wholly on the application of the correct accountancy standards and the avoidance of fraud. Auditors of company accounts are not normally expected to address whether a company is efficient or wasting money. There is no evidence that the CAA’s auditors have adopted a different approach.
Secondly, just because the CAA is almost wholly financed by private funds, with no taxpayer money involved, is hardly a reason to allow inefficiency and waste.”
That affects new clause 2. He continues:
“There has to be a system of checks and balances to ensure future CAA management is held to account. Originally, the predecessor of the National Audit Office fulfilled this role, but…this was subsequently changed.”
There are clearly strong views within the industry.

Graham Stringer: The point that my hon. Friend makes is overwhelming and takes us back to clause 2, which states that only efficiency and economy, not effectiveness, are expected of the CAA, and one would expect the National Audit Office to bring that forward. The issue is particularly worrying because the CAA will get a lot of powers, particularly affecting airports and the aviation industry as a whole, through which it could accumulate a lot of costs.

Jim Fitzpatrick: My hon. Friend reinforces the point he made when he moved amendment 6 this morning. He suggested that there may not necessarily be an appropriate balance between costs apportioned to airports and costs apportioned to airlines. The CAA is taking on additional powers. When the hon. Member for Amber Valley moved his amendment this morning—I am sorry to raise his excellent group of amendments again—he mentioned the CAA’s additional powers and its additional requirement to collate information. [ Interruption. ] I wish the Government Whip would not look at the hon. Member for Amber Valley in such a warm and friendly way, because he may be misinterpreted.
The CAA will need to recruit staff to build a degree of bureaucracy to meet its new requirements. As my hon. Friend the Member for Blackley and Broughton said, we need to get the balance right and, as Dr Humphreys says, we need to ensure that the CAA is unfettered and that the bureaucracy it has to build to perform the functions that the Government require of it is neither costly nor disproportionately passed on to airports, airlines and, ultimately, passengers.
We believe that the NAO is an appropriate body to fulfil the role of ensuring efficiency and economy, which is why I have moved new clause 1 as the first of our two new clauses. We will be grateful to hear what the Minister has to say. If she cannot persuade us, we will press the new clause to a vote.

Theresa Villiers: I have listened carefully to the shadow Minister. This is an important issue and he raises some important points. Although I take those concerns seriously, I cannot support new clause 1. I certainly will continue to reflect on this matter and the points made by the shadow Minister, including those he has quoted from BATA and those made by other stakeholders. I will explain why I do not think new clause 1 is appropriate or justified.
First, on a technical matter, to have effect the new clause should refer to the Comptroller and Auditor General rather than the National Audit Office. A consequential amendment would also be needed to schedule 4 of the National Audit Act 1983, which excludes the CAA from NAO scrutiny in respect of the use of its resources in discharging its functions.
I turn now to the important substantive issues raised by the Opposition. I am not convinced that there are compelling reasons to believe that NAO scrutiny would deliver a better result than that delivered by the current mechanisms through which the CAA’s functions are audited and scrutinised. I fully agree that the Comptroller and Auditor General and his staff at the NAO do a highly effective job within their remit. However, I am not persuaded that the current arrangements for scrutinising the CAA are defective or inadequate in a way that would justify new clause 1.
Moreover, as I said in evidence, the National Audit Office is tasked with keeping track of taxpayers’ money, and the income that the CAA receives from the aviation industry is not public spending. The vast majority of the CAA’s income is not from the taxpayer; only about £3 million came from the taxpayer in 2010-11. Parliament recognised the funding status of the CAA in removing the NAO’s role in 1984. The issue was considered again, as I said in my intervention, in 2008 by Sir Joseph Pilling in the strategic review of the CAA that the previous Government asked him to carry out. Sir Joseph concluded:
“In the light of the CAA’s existing audit arrangements and the opportunity to build on them in the way I have described… I see no need for the National Audit Office to be involved directly with the CAA.”
The previous Government appeared to give a fairly broad welcome to Sir Joseph’s conclusions and we have no indication that at the time Ministers raised concerns about the NAO point. I have certainly taken on board the response of the shadow Minister and his view that matters have changed, but I cannot see that the changes put forward in the Bill would have a material impact on those decisions. I cannot see a justification for taking a different approach from that adopted by Labour Ministers.
It is true that other industry-funded regulators come under the scrutiny of the NAO, but, unlike the CAA, those are generally either non-ministerial Government Departments or rely on Government funding for a significant proportion of their income. The CAA’s situation is different from regulators such as, for example, the Office of Rail Regulation. Although the ORR is funded by industry licences, it is distinct because of the high level of public funding that the rail industry receives. The aviation industry, by contrast, does not receive a public subsidy. The income of the CAA from the aviation industry comes through fees and licences and not from public spending.
I have not heard evidence to convince me that the existing arrangements for financial scrutiny of the CAA are defective. Perhaps I can provide some reassurance by going through the robust mechanisms available for scrutiny of the CAA. The Secretary of State appoints the CAA’s external auditors; presents the CAA’s accounts to Parliament by placing the annual reporting statement in the Library; is involved in the development of the corporate plan; approves, with the Treasury’s consent, the CAA’s national loans and overdraft each year; sets the CAA’s required rate of return on capital; and approves the remuneration of the chairman and non-executive members of the CAA board. That oversight, combined with the work of the CAA’s independent auditors themselves, gives a strong incentive to secure value for money and offers accountability to Parliament.
In addition, as we discussed earlier in the debate on clause 100, the CAA consults on its charges and fees. That provides ample opportunity for industry to raise concerns, with judicial review as an option where appropriate.
The CAA has implemented the Pilling recommendation on value for money audits. Value for money considerations are now integrated into the CAA’s audit programme, and the CAA’s audit partners provide the expertise to ensure that those considerations are explored fully. Furthermore, the efficiency, effectiveness and economic issues are specifically identified in reports submitted to the Department for Transport.
As I have said, in the light of those conclusions I am unable to conclude that the current arrangements for scrutiny of the CAA’s activities are inadequate, which is why I cannot support new clause 1. However, I will continue to reflect on the matter and consider whether further reassurance can be given to Parliament on Report.

Jim Fitzpatrick: I am grateful to the Minister for her explanation. She teased us this morning when she said she fully agreed with our amendment—and then proceeded to demolish it; however, there is a little more encouragement here. She said she will reflect on what we said, and said again before sitting down that she will continue to reflect on what we said. However, we want to press new clause 1 to a vote to demonstrate the strength of feeling on this side of the Committee. Notwithstanding the technical details, Sir Joseph Pilling did not formally recommend any oversight or technical arrangements for the Comptroller and Auditor General or the National Audit Office. The principle is valid and relevant. The Minister says that the money is from not the taxpayer, but the industry. The taxpayer pays the fares and charges, and feeds the industry, so it is an indirect association. The taxpayer would expect us to be mindful of trying to keep travel costs down.
I hear what the Minister says about the Secretary of State’s role in reviewing the accounts and appointing non-executive directors, which we discussed earlier. I am not persuaded by the point about parliamentary scrutiny, because so much material goes through Parliament. The NAO looks at the accounts of other regulators, and could very easily do a similar job for the CAA. That would provide the Secretary of State, when she is signing off on the accounts, with the certainty that not only departmental officials but the people responsible for overseeing public finances generally had examined them. That would give a stronger incentive to the CAA to stay on the right side of efficiency.
With respect to the Minister and her explanation, we do not wish to withdraw the new clause.

Question put, That the clause be read a Second time.

The Committee divided: Ayes 9, Noes 14.

Question accordingly negatived.

New Clause 2  - CAA general financial duties

‘In section 8 of the Civil Aviation Act 1982 (General financial duties) after subsection (4) insert—
“(5) It shall be the duty of the CAA to conduct its affairs in such a manner as to fulfil a general duty of efficiency in the use of its financial resources.”’.—(Jim Fitzpatrick.)

Brought up, and read the First time.

Jim Fitzpatrick: I beg to move, That the clause be read a Second time.
The new clause is straightforward and would introduce a duty of efficiency, in line with a Select Committee recommendation which the Government have not accepted. We do not follow Select Committee recommendations slavishly, as we indicated earlier today, but we agree with this one.
A number of those who gave evidence to the Select Committee on Transport suggested that the Civil Aviation Authority does not currently operate in the most efficient way possible. For example, British Airways noted in its written evidence:
“No measures to encourage efficiency are included in the Bill and there has been no consultation on this…the CAA should be given the same ‘better regulation’ duties as in section 1 of the Bill (the airport regulation section)…We think the CAA should be given a duty to consider the efficiency of airport processes when imposing obligations and a requirement to consult affected parties.”
BA also states on the record that
“the CAA has scope to make significant improvements in efficiency”
and should have a
“duty to operate efficiently; and…A requirement that any charge should recover only the CAA’s costs allocated to the relevant activity.”
In order to keep costs for airlines and passengers as low as possible, and to minimise the charges, it is essential that the CAA adopt efficient ways of working and modern technology where possible. Higher costs for airlines arising from CAA charges have the potential to damage the competitiveness of major UK airports compared with alternative operators abroad. It would be helpful if the Minister explained why the Department has declined to adopt the express recommendation of the Select Committee, because it looks relatively straightforward to us. In Committee, the Minister quoted from the indicative licence produced by the CAA for BAA and Heathrow:
“Condition 7 requires the licence holder to operate the airport efficiently”.––[Official Report, Civil Aviation Public Bill Committee, 1 March 2012; c. 205.]
The same rule should apply to the regulator.
I leave the last word to Dr Barry Humphreys, in yesterday’s e-mail, which I mentioned earlier:
“The CAA is a regulator which is required to operate independently of government. The Bill will increase the extent of independence, which from our perspective”—
that of BATA, the British Air Transport Association—
“is to be welcomed. However, it is surely wrong that with respect to running its business and spending the money provided by stakeholders, and in the absence of competitive pressures, the CAA should be wholly unfettered. We have seen in relation to financial services how important it is that regulators are monitored effectively. We have been unable to discover any other UK regulator which is not subject to regular NAO-type audit. British Airways has pointed out in its submission to the Scrutiny Committee”,
which I mentioned,
“that in the Financial Services Bill currently progressing through Parliament, the Government has proposed to subject the Financial Conduct Authority and the Prudential Regulatory Authority to clear requirements to discharge their duties with due regard to the need for efficiency and to subject them to audit by the NAO. It would be extraordinary if a similar safeguard was not imposed on the CAA.”
Clearly, monitoring and efficient operation of the regulators is very much Government policy, which we support. We stood some criticism for not regulating the financial services industries when we were in government, although I seem to recall that the Opposition at the time were calling for less regulation, but I will not split hairs. The Bill seems to be going in the reverse direction. We are keen to hear the Minister’s explanation for not accepting the Transport Committee’s recommendation, which we are keen to support.

Theresa Villiers: Sadly, the shadow Minister will think me hard-hearted, because I cannot support new clause 2 either. I did not succeed in reassuring him on the NAO point, but perhaps I will be more successful on the current one. I recognise the concerns but am confident that the Bill delivers a framework that requires the CAA to operate efficiently and to keep its costs down in exactly the way he would like to see. I note the concerns expressed on Second Reading and those to which he referred in the report of the Transport Committee. I understand and sympathise with the points made, but I do not believe that a new clause is necessary to deliver the desired result. I hope I can reassure the Opposition that the Bill already deals with the points raised and that it already places a legal requirement on the CAA to act in an efficient way.

Nicholas Dakin: Given that the Minister is supportive of the new clause’s intention, what is the disadvantage of having it in the Bill? My hon. Friend has expressed the concerns of eminent people.

Theresa Villiers: There is no need to put the new clause in the Bill because the measures are already provided for in the Bill. Clause 1(3) and (4) already require the CAA to carry out its economic regulation functions under part 1 of the Bill
“in a way which is transparent, accountable, proportionate and consistent”.
Those subsections also state that the CAA’s regulatory activities
“should be targeted only at cases in which action is needed”.
To meet its statutory obligation to act in a proportionate way and to target activity only in cases where it is needed, the CAA is obliged to act in an efficient way and to have regard to the costs and benefits of its activities. So, clause 1, which we have debated at length, already delivers the efficiency duty sought by the new clause before us.
Better regulation principles also apply to the other functions conferred on the CAA by the Bill, such as the consumer and environmental information, guidance and advice functions we debated this morning.

Pat Glass: I am listening carefully to what the Minister says. I am not aware of any other public organisation that does not specifically have a duty to act efficiently. That duty is often a useful backstop in the courts when public organisations are pressed to provide expensive services that they feel they do not need to deliver. It is normal for public bodies and is incredibly useful sometimes, particularly in the courts.

Theresa Villiers: I can only re-emphasise that my understanding and interpretation of the Bill is that it does indeed require the CAA to act in an efficient way.
Clause 92 requires the CAA to consult on and publish a statement of its policy on how it intends to use the functions that we discussed in relation to sections 83 and 84, and expressly requires it to have regard to the general principle that the benefits of regulatory activity should outweigh the costs. The Legislative and Regulatory Reform Act 2006 also requires any person exercising a regulatory function to have regard to a statutory code of practice when determining general policies or principles. This code—the statutory Regulators’ Compliance Code—requires that regulators
“should be accountable for the efficiency and effectiveness of their activities, while remaining independent in the decisions they take”.
The Secretary of State for Transport writes to the CAA chair, setting objectives for their term. The most recent such letter, which is a published document, states:
“I…expect you to…lead the Authority in such a way that it: is run efficiently and effectively, thereby minimising the cost on the aviation sector, and providing value for money, taking account of the Government’s policy on remuneration”.
Section 15(1) of the Civil Aviation Act 1982 requires the CAA to keep proper accounts and records and prepare for each accounting year a statement of accounts. In addition, the Secretary of State has a number of powers with regard to the audit of CAA activities—as I set out for the Committee in the debate on new clause one—including the appointment of the CAA’s independent auditors and presentation of their accounts to Parliament. This oversight, combined with the work of the CAA’s auditors, gives strong incentive to secure value for money, and offers accountability to Parliament.
Additionally, the CAA consults on its charges and fees, giving the aviation industry the chance to raise any concerns it has. It is robust in protecting its interests in those matters. Of course, it has judicial review as a potential means to follow up serious concerns where appropriate.
I hope I have reassured the shadow Minister. If he wishes to press the new clause to a Division, I must ask my colleagues to oppose it.

Jim Fitzpatrick: I am sorry to say that the Minister has not reassured us. We have two concerns about her response. The option of judicial review seems a heavy-handed and expensive way to correct something that could be addressed in the Bill. She said that clause 1(3) lists what the CAA is required to “have regard to”, which we accept and understand, but our new clause 2 states that
“It shall be the duty of the CAA to conduct its affairs”
efficiently, in relation to its financial resources. That sounds as if we are splitting hairs, but in reality, new clause 2, which is allied with new clause 1, is a very important initiative that would compel the Civil Aviation Authority—with its new powers and responsibilities, and the additional staff to fulfil them—to act much more efficiently than it would if it only needed to “have regard to” the requirements. We have not been persuaded by the Minister, and we want to press the new clause to a Division.

Question put, That the clause be read a Second time.

The Committee divided: Ayes 8, Noes 13.

Question accordingly negatived.

New Clause 3  - Obligation to operate an air transport service serving a specified route

‘(1) The Secretary of State may by order require the CAA to impose on holders of operating licences or route licences an obligation to operate an air transport service serving a specified route as part of the licence conditions for operating another route.
(2) Before making an order under subsection (1) the Secretary of State must consult with—
(a) the CAA;
(b) holders of operating licences or route licences which may become subject to an obligation to operate an air transport service serving the specified route;
(c) providers of airport operation services connected with the specified route;
(d) providers of transport services other than air transport services serving the land equivalent of the specified route;
(e) any other person or body appearing to the Secretary of State to have an interest in the matter.
(3) An order under this section is subject to annulment in pursuance of a resolution of either House of Parliament.’.— (Mr Tom Harris.)

Brought up, and read the First time.

Tom Harris: I beg to move, That the clause be read a Second time.
The new clause would give the Secretary of State the authority to require the CAA to impose on any airline an obligation to provide a service on any route. The CAA would draw up such a regulation, which could be imposed only after consultation with all interested bodies. I accept that, at first glance, the new clause might be interpreted as some sort of Stalinist attempt by the state to wrest control of the airline industry—that may or may not be a bad thing—but it is merely a probing amendment, intended to raise some important issues with regard to UK airports and their access to the UK’s hub airport at Heathrow.
The new clause gives me yet another opportunity to raise the issue of Heathrow’s third runway, the absence of which lies at the heart of many of the capacity problems faced by the UK, not only at Heathrow but throughout the country. A year ago, bmi—British Midland International—confirmed that it would withdraw its regular scheduled service between Glasgow and Heathrow. It blamed the decision on increases in passenger charges at Heathrow, but there is no doubt in my mind that the decision was made—as such decisions will be made in future—in the context of a hub airport that operates at 99% of capacity, and at which slots for regional services can be better and more profitably used by airlines for long-haul services. I raised that danger in debates on the future of Heathrow in the Chamber in 2009.

Gavin Shuker: My hon. Friend mentions problems of capacity. Does he agree that the lack of capacity has led to incredible competition for slots, leading to several situations being resolved in the law courts, rather than through constructive negotiation?

Tom Harris: My hon. Friend is absolutely right, and he has been very consistent in his support for the economic case for Heathrow.
I spoke flippantly about this being some kind of Stalinist plot; at this point it may be wise to mention that the hon. Member for Stockton South (James Wharton) has also called for Government action to preserve slots for regional services, and has called for a public service obligation to protect Heathrow flights to and from Durham Tees Valley airport. I will come on to that shortly.
My hon. Friend the Member for Luton South is absolutely right: without expansion of capacity at Heathrow, domestic services and therefore regional economies will suffer, and so it has proved. Colleagues in north-east England, many of whom have added their name to the new clause, have had a similar experience following bmi’s decision to withdraw services between Durham Tees Valley airport and Heathrow. There was no consultation. Surely any Government—particularly a Government who campaigned against Heathrow expansion on the basis of a commitment to developing and nurturing regional airports—have a duty to intervene to ensure that local economies are not put at risk by the short-sighted commercial decisions of airlines.
The new clause would ensure that there was a mandatory consultation period before any obligation could be put on airlines by the CAA under direction from the Secretary of State. That level of consultation has been sadly lacking whenever airlines such as bmi have unilaterally withdrawn services that are crucial to regional development and regional economies across the country. Those economies are being put at risk by a short-sighted approach to Heathrow expansion. That can be rebalanced, if not completely solved, by allowing the CAA to impose the obligations that I have mentioned on airlines. I look forward to the Minister’s response.

Pat Glass: I understand that this is a probing new clause, and I shall be interested to hear the Minister’s response to the issues raised. Transport underpins the quality of our life and our economic prospects, particularly in the far-flung regions of this country. The Government have said many times that they wish to rebalance the economy from the south to the north. We have heard many times, throughout the passage of this Bill and others, about the problems of aviation capacity in the south-east. The key to that rebalancing is to ensure that regional transport infrastructure is up to the job. That includes the role of regional airports and their links to the south-east.
We have heard a number of times about the importance of regional airports and the role that they can play in dealing with capacity issues in the south-east, if they are allowed to, and we have heard how well run, efficient, effective and profitable regional airports can be. In an earlier sitting, the Minister talked about the efficiency of Manchester and Newcastle airports in particular. However, as many in my region know only too well, the efficiency, effectiveness and profitability of a good regional airport, particularly the smaller radial airports, can be thrown into jeopardy overnight by one big player pulling out and using its Heathrow slots elsewhere. The new clause would allow the Secretary of State by order to require the Civil Aviation Authority to impose on an airline an obligation to operate an air transport service serving a specified route before allowing them to operate another route. That would be a general obligation; it is not about one particular airport or one particular region, and it could not be tied to one specific airport or airline.

Chris Heaton-Harris: I wish to pose a question. This goes back to a point that the hon. Lady made about the environmental consequences of flying. When I was a member of the European Parliament—I have harked back to that time on several occasions—British Midland Airways used to keep a slot open by flying a completely empty plane between East Midlands airport and Heathrow. That was not particularly good for the environment, and it certainly did not help the people of the east midlands. I am slightly worried that the new clause would have an unforeseen consequence. I understand why it was tabled, but I am not convinced that it has been thought through.

Pat Glass: That is a valid point, but my understanding is that when slots have been pulled, particularly from airports in my region, it is not because the planes are flying half-empty or the route is unprofitable; it is because more profit can be made elsewhere.

Gavin Shuker: On the point made by the hon. Member for Daventry, an additional issue strikes me. Many low-cost airlines will move to wherever the landing fees are cheapest. They can move planes parked overnight at stands, which is different from the core business of flying around. Under the new clause, there would presumably be a compelling case for entering into new negotiations with an existing provider of airport services, instead of just upping and leaving overnight.

Pat Glass: Absolutely. The new clause would ensure that airlines that pulled out of airports at short notice, and so risked the future of small regional airports, risked losing their right to use Heathrow slots elsewhere. As my hon. Friend the Member for Glasgow South said, had the amendment been in place when bmi pulled out of its slots for flights between Heathrow and Durham Tees Valley airport, the CAA could have insisted that bmi was still under an obligation to fly that route. It might then not have pulled out, or certainly not without consultation.
When a big player pulls out of a small regional airport and uses its slots at Heathrow for other profitable routes, there is a devastating impact not only on small regional airports, but on the whole region, particularly socially deprived regions. It also reduces the efficiency of an airport such as Heathrow as an internal hub.
I have been told that only two regional airports now have slots into Heathrow: Newcastle and Manchester. Until we get High Speed 2, that will not be good for the regions. People who live in the regions have told me that they must fly to Charles de Gaulle, Madrid or Schiphol to fly on elsewhere. The arrangement works both ways, and it has an impact on Heathrow, as well as regional airports.

Julian Huppert: I am following what the hon. Lady says, but I am struggling to see how she can square her argument with any concern for the environment. Surely the environmental consequences of requiring airlines to continue to fly domestic flights that are unprofitable, and therefore presumably not full, are damaging. Replacing short domestic flights with long-haul larger planes that carry more people and are more efficient would much better environmentally than the sort of action she is considering.

Pat Glass: So if it is not profitable, we should scrap it? Is it more environmentally friendly for people to fly from Glasgow or Durham Tees Valley to Madrid instead of London? I understand that airlines need to be profitable, and that they are operating in a challenging market, but they do not operate in isolation, and they have a duty to the regions, as well as to the hub. The new clause would go some way to regulating the situation and ensuring that those obligations are met.

Gavin Shuker: I am grateful to you, Mrs Riordan, for calling me to speak as we come to the end of the day, and the end of the Bill. New clause 3 is an interesting probing amendment with much merit. We have heard from my hon. Friends the Members for Glasgow South, and for North West Durham, about the effect of lack of capacity in the UK, and some of the unexpected consequences. Heathrow slots will always be full, certainly while it has only two runways and operates at 99% capacity, and falls over at the first burst of snow as a result, and while we lack an aviation strategy to expand capacity in the south-east properly. However, in many regional airports—Luton airport, which I would argue is London’s premier airport, is in my constituency—

Henry Smith: Will the hon. Gentleman give way?

Gavin Shuker: I know where this is going. For the record, I refuse to give way to the hon. Gentleman, who has some small aerodrome in his constituency.
Changes in aviation over the past 15 or 20 years have meant that, instead of wanting to fly directly from point to point, low-cost carriers and airlines are willing to be flexible about where they fly to; they will perhaps fly to airports with fewer facilities, and have expanded to fly into more regional airports. Some airlines are flying to airports that are 50 km or 100 km away from the place advertised as being where the passenger is finally dropped off. That has meant competition for slots, and much more competition between regional airports in attracting business.
My hon. Friend the Member for North West Durham rightly gave the example of Durham Tees Valley airport. In 2004, bmibaby signed an agreement with Durham Tees Valley airport, requiring it to base two aircraft at the airport, and operate them from that airport, for a period of 10 years. That is not unusual in the industry; what is unusual is that in late 2006, the airline withdrew both aircraft from the airport to redeploy them to other UK airports. Presumably, that decision was driven by a couple of factors, including the ability to grow that route. I think we would all accept that. The hon. Member for Cambridge pointed out some of the implications of what happens when airlines are unable to fill their routes.
I might speculate and say that the move could have been due to the issue of where those planes could be stored overnight. The low-cost business requires airframes to be moved around perhaps four or five different cities. That is very much a logistical exercise. Small changes in routes may have a big impact on where aircraft are sited. In this case, in late 2006, bmibaby withdrew both aircraft to redeploy them to other UK airports. It subsequently cancelled all services without warning, and without agreeing with the airport any terms for departure.
I am sure that everyone here has concerns about that business practice. I am a proponent of aviation and its role in the UK economy. I fundamentally believe in aviation’s power for good, and I think that we sometimes do ourselves a disservice when we talk down an industry that employs so many. On the environmental point, I have to say that the industry has a very clear road map and plan for reducing carbon emissions and being part of the UK’s export-led recovery.
When new routes are opened up, from place to place and point to point, growth follows. I can give the anecdotal example of an airport in the north-west that opened up a route to the west coast of the United States. Subsequently, over a period of two or three years, growth expanded massively, with local businesses exporting to that part of the United States. Businesses and hubs grow around airports. I say that simply because I fundamentally believe that airlines are a force for good. However, we should call on that relationship, and say that responsible business and responsible capitalism are not—how best to put this for Hansard?

Chris Heaton-Harris: Perhaps I can help the hon. Gentleman out. I thank him for giving way. I agree with him most of the time. His airport services a huge number of people from my constituency, and I am afraid that I have to say to my hon. Friend the Member for Crawley that it is probably Daventry’s favourite London airport. Let us consider the example of Silverjet, which had a route to New York. It was a busy route, but not profitable enough for that airline to keep going. My problem with the new clause is that it would tie the arms of new and fledgling businesses operating out of our regional airports. East Midlands airport is the airport that I know best and have used the most. I would hate us to constrain new entries into the market by giving them the worry that they might have to service a route that is unprofitable.

Gavin Shuker: The hon. Gentleman raises the example of Silverjet in my constituency. Of course, Silverjet was a business that fell over, which was sad because it offered an extremely good service. What happened was pretty marginal. The timing and the fall-off of the UK economy at that point meant that it was not able to secure a proper business jet service to the States. The new clause would not constrain businesses that were put into bankruptcy or were in financial difficulty in that sense; it would only require consultation before services were withdrawn.
For example, with regard to the UK’s railways, two successive companies running the east coast line have fallen over at different points, despite the stringent requirements that we place on train operating company franchising—sometimes to the detriment of smaller companies, which cannot get in. There is a question to be asked about that process, but I will not digress.
The behaviour of a train operating company in one region, if it chooses to pull out, should have a knock-on effect on other routes being advertised or awarded. Again, this probing new clause is intended to make the point that the behaviour of an airline before it is granted a new route or new slot should be taken into account. In that way, we hope that a more responsible approach from a number of airlines could be sought.
It was clear, in the case of the east coast line, that the business practice in question was not only unhelpful but disingenuous. Subsequently, it was sorted out in the courts over a number of years that bmibaby did not behave in the way that it should have done in upholding the agreement that it rightly made. However, should that have a knock-on effect on the other routes that it hopes to reach a settlement on and is hoping to fly?
In that context, the new clause makes good sense. It raises important issues and calls for thriving aviation in the UK, which we acknowledge, and it offers something in return as well. Much of this good Bill would resettle the UK’s aviation regulation for the next 20 or 30 years, say. Looking back at the last 20 or 30 years, we see the big shift that has happened with low-cost carriers and people wanting to be more mobile in respect of where planes and stands are sited. The new clause goes a long way towards correcting the situation, so that we can have a successful, thriving aviation sector in the next 20 or 30 years as well.

Theresa Villiers: I welcome the debate and the comments of the hon. Member for Glasgow South, who introduced it, and other Committee members who have contributed. I had no intention of accusing the hon. Gentleman of a Stalinist plot in tabling this probing new clause. I reassure him that I am aware of the concerns that my hon. Friend the Member for Stockton South (James Wharton) has expressed on related matters; he has conveyed those directly to me and to colleagues at the Department for Transport.
The Government take seriously the matters raised by discussion of the amendment. It is useful to be told that it is just a probing amendment, but it raises important issues. We recognise the vital contribution that regional airports make to local economies and that high-quality regional connectivity is important for our economy. In future, we hope that high-speed rail will provide a viable and lower-carbon alternative to thousands of flights, but we recognise that, particularly for remoter areas of the UK, regional air services will continue to provide a vital lifeline and a means of connectivity.

Nicholas Dakin: Is the Minister suggesting that high-speed rail will go up as far as Newcastle and into Scotland?

Theresa Villiers: The hon. Member for Scunthorpe will be aware that the Government’s current plans for HS2 take it to Leeds and Manchester, but the benefits of the line will be felt much more widely, as trains run off the new line on to the existing network, reducing journey times to destinations such as Newcastle, Edinburgh and Glasgow. He may also be aware that the coalition agreement states clearly that our aspiration is a truly national network. In due course, obviously, a national network would embrace destinations in Scotland.
I have to share my concerns with hon. Members about how the new clause might work in practice. EU regulations govern the allocation, transfer and exchange of slots at Heathrow. EU slot regulations follow the world slot guidelines determined by the International Air Transport Association, reflecting commercial aviation’s global business. The rules on slots are contained in council regulation EEC 95/93. They are aimed at providing airlines with fair and equal access to airports across the EU through independent and transparent slot allocation procedures. Member states are required to ensure that independent airport slot co-ordinators are appointed to manage slot allocation at airports where capacity problems occur.
I am afraid that EU law does not allow either the Government or the CAA to have any role in slot allocation, apart from the limited exception provided by the public service obligation procedure, to which I will come in a moment. EC regulation 1008/2008 allows a member state to impose public service obligations—PSOs—to protect air services to airports serving a peripheral or development region, or on thin routes to any airport on its territory, where such a route is considered vital for the economic and social development of the region.
It would be open to regional bodies—local enterprise partnerships and the devolved Administrations, for example—to apply to the Secretary of State for Transport to impose a PSO on an air route, if they felt that a case could be made that satisfied the requirements of EU regulation. If approved, that would permit slots to be ring-fenced at a relevant London airport.
However, I am afraid that one of the principles of PSOs is that they can be imposed only when it is necessary to ensure adequate services between two cities or regions, rather than purely for the purposes of linking individual airports. Importantly, that means that when judging whether a region has adequate services to London, it is necessary to take into account the level and nature of services to all five of London’s main airports, as well as surface transport connections. There is, I am afraid, no other mechanism for the Government to intervene in the allocation of slots at Heathrow or other London airports.

Mark Reckless: Did the Minister not suggest earlier that the mechanism would be if the Opposition were to agree to an amendment of the European Communities Act 1972? [ Laughter. ]

Theresa Villiers: Surprisingly enough, I was just coming to a similar point. Under the rules currently laid down by European law, the potential for the ring-fencing of slots at Heathrow to protect regional services is covered by the rules on PSOs only. I am afraid, therefore, that the new clause is contrary to EU law because it would override the strict criteria and process by which European Governments are permitted to intervene in route operations. As my hon. Friend said, if the Opposition were serious about the new clause, the repeal or amendment of the European Communities Act would be required.

Gavin Shuker: I will disappoint the Minister by not giving a commitment on that particular point. She mentioned the five London airports. Will she say a couple of words about the definition of those five and how flexible it is? Could the number be increased? For example, there has been expansion at Southend recently.

Theresa Villiers: The hon. Gentleman is absolutely right. Perhaps we should now start talking about at least six London airports, given that London Southend has delivered such impressive new facilities. I very much enjoyed my visit there and I think the Secretary of State was also there recently.

Gavin Shuker: The Minister should come to Luton.

Theresa Villiers: I was meant to go to Luton but unfortunately I fell off my bicycle and broke my collar bone, so I had to cancel. However, I will be back.

Julian Huppert: While the Minister is talking about the great airports of our country, I hope she will say something about her visit to Cambridge international airport, where she was a very welcome guest.

Theresa Villiers: I loved my visit to Cambridge international and my many visits to Gatwick and Heathrow and a whole range of airports that do great things in supporting our economy and enabling people to travel abroad on their holidays.
Having identified the EU block, I can share with the Committee that these matters are under discussion at a European level. The European Commission’s better airports package, the proposal to amend the EU slot regulations, provides an opportunity for the UK to highlight general issues with the European Commission and explore the inclusion of measures to help secure the ongoing provision of air services between UK regions and congested London airports. The Committee’s discussions today will provide a useful input into that process. I believe that the European Scrutiny Committee is due to debate the better airports package next week.
Although I understand the concerns behind the new clause, I am unable to support it for the reasons given. I recognise that caution is needed in relation to the concerns expressed by several Government Members, including my hon. Friend the Member for Cambridge. Nevertheless, I assure the Committee that the Government are committed to supporting regional airports and regional connectivity.
Our plans for a new high-speed rail network, connecting London, Birmingham, Manchester and Leeds, provide a major improvement to regional connectivity, which will be felt far wider than the destinations directly served by the first phase of the project, as I said in reply to the hon. Member for Scunthorpe. For example, our HS2 proposals for the north of England deliver a journey time from Glasgow and Edinburgh to London of approximately three and a half hours. We regard our plans for HS2 as the first stages of a genuinely national network, which will provide further benefits for regional economies and regional connectivity.
Unlike the hon. Member for Glasgow South, I do not believe that a third runway at Heathrow is the solution to our country’s transport problems. Apparently, the Leader of the Opposition also opposes a third runway, but it seems that that message has not percolated through to the hon. Gentleman’s party. We will soon consult on our new aviation policy framework, which will include a focus on regional airports. Alongside that, we will issue a call for evidence on maintaining the status of the UK as an international hub for aviation with excellent connectivity.
I welcome the contributions made by hon. Members about this important matter.

Tom Harris: I am grateful for the Minister’s comments. I admit that it would have come as something of a surprise if she had stood up and said that she would accept the new clause. Perhaps it was my fault for announcing that it was a probing amendment; in future, I should try to keep the Government Whip on his toes instead of on his BlackBerry.
It is incredibly tempting to press the new clause to a vote to give Government Members an opportunity to vote in favour of EU legislation, but I will not be as pugnacious and hard-hearted as my hon. Friend the Member for Poplar and Limehouse, who, given half a chance, would have pressed anything to a vote.
I have listened to the Minister’s comments and am grateful for what she said about the debate that is taking place at a European level. I hope she will recognise, however, that this is such an important matter that the UK Government must take a lead. I support high-speed rail, but it is not enough constantly to refer to HS2 as a solution for the problems faced by regional airports; those problems extend far beyond the need for connectivity by surface transport.
At some point, the Government must find genuine solutions. The two governing parties will have to come up with a little more meat in relation to what I said about Heathrow’s expansion. I understand the Lib Dem position—its Members want a modal shift from air to horse-drawn carriage, which is fair enough, but the Conservative party used to be known as the pro-business party. Until it becomes that again, I am afraid that the industry will not accept whatever strategy or short-term solutions it comes up with.
I am grateful to the Minister because she has obviously given the matter genuine thought. It has been a good debate. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Theresa Villiers: On a point of order, Mrs Riordan. If I may delay the Committee for a few more minutes, I should like to thank you and Sir Roger, in his absence, for managing proceedings in such an exemplary fashion. A Public Bill Committee is a fairly new experience for some hon. Members, and I am sure that your gracious and helpful chairmanship has eased their introduction into what can sometimes feel like a rather arcane and technical aspect of parliamentary work. Arcane and technical though it can be, it is hugely important, so I thank all members of the Committee, on both sides, for their thorough scrutiny of an important Bill.
I will pick out just a few. My hon. Friend the Member for Amber Valley demonstrated a formidable technical grasp of the Bill, as well as a determination to address the issues. My hon. Friend the Member for Daventry highlighted the concerns of his constituents who depend on the continued success of East Midlands airport and DHL. I hope I have provided some reassurance on that. My hon. Friend the Member for Milton Keynes South had a close eye on the consumer interest.
The hon. Member for North West Durham made many thoughtful and incisive contributions, enlivened by anecdotes to illustrate how important the issues dealt with by the Bill are. The hon. Member for Bolton West brought to bear the considerable expertise on transport matters that she demonstrates so regularly in the Select Committee on Transport. Of course, the hon. Member for Blackley and Broughton was rigorous in challenging the Bill’s provisions and asserting the need to avoid over-regulation.
I thank the Opposition Front Benchers for raising a wide range of interesting and important points, giving the Committee the opportunity to consider all the key issues in the Bill. We had well informed and detailed debates, particularly on the environment, information powers, aviation security and extension of the ATOL scheme. The extent of their support for so much of the Bill is much appreciated and reflects the fact that the Bill can be said to have more than one parent. Both the previous and present Governments can claim some credit for the positive response the Bill has received from a wide range of stakeholders, although I must correct one point. I had been happy to share the credit for a move to an outcomes-focused, risk-based approach to security with the previous Government, but it seems that I was incorrect and the credit for the change can therefore be claimed solely by the present Government.
I am pleased to note that the Committee has covered all 112 clauses in and 14 schedules to the Bill with informed and thorough debate, which has provided rigorous scrutiny. I am sorry that I have had to appear with my arm in a sling. Sometimes low-carbon transport choices come at a price. However, I can warmly recommend a combination of paracetamol, codeine and diet Red Bull as a way to survive a Public Bill Committee when recovering from an injury.
We have done the Bill justice, and the fact that we have done so in a timely and efficient fashion to enable us to finish early is a credit to the Chairmen, to the usual channels and to all members of the Committee. My Whip, my hon. Friend the Member for North Herefordshire, has done a sterling job. The usual channels have worked well together in aiding the management of the work that we have undertaken, ensuring that we have had ample time in each sitting for detailed and serious consideration and scrutiny of the Bill.
I thank the Committee staff for their excellent work and the Hansard reporters. I commend the Bill to the Committee and look forward to our further deliberations on Report.

Jim Fitzpatrick: Further to that point of order, Mrs Riordan. I am happy to second that vote of thanks. I thank the Minister and her colleagues and officials. There are one or two exceptions. Obviously, there is disappointment that the hon. Member for Finchley and Golders Green decided that he would not vote for amendment 18 before he even listened to the arguments. There is disappointment that the hon. Member for Amber Valley did not support his own amendment 29; we gave him the chance. There is disappointment with the hon. Member for Cambridge for not supporting our amendment, but we do have hopes for him, if his hon. Friend the Member for Norwich South will speak to him, at Report stage. We know he is engaging with colleagues on the other side of the Chamber regarding the environmental duty, so we will be keen to see how that develops before we get to the Floor of the House.
We express our sincere appreciation to Dr Thatcher and her team for their first-class advice and assistance in the preparation of our amendments. We thank the Hansard reporters and the messengers for their efficient and accurate communications and reporting.
I thank my hon. Friends for their interest, support, wisdom and insight, and for their contributions to the debates. There was excellent stewardship by my hon. Friend the Member for Scunthorpe, ably assisted by my hon. Friend the Member for North West Durham. It has been a pleasure to share responsibilities on the Front Bench with my hon. Friend the Member for Barrow and Furness. Even though there were two of us, we could not move the Minister on virtually anything, but we still have hopes for Report. The professionalism of the Government Whip, in association with the usual channels, ensured that we not only kept on track but finished ahead of time. I must confess that I did not enjoy sharing in the emotional rollercoaster that is being a West Ham United fan with the hon. Member for Elmet and Rothwell.
Finally, Mrs Riordan, I thank you and Sir Roger for keeping us in order. We had a conversation after our first sitting, and when I asked you how it was going, I discovered that it was the first sitting of a Public Bill Committee that you had chaired. That did not come across in any way. Your confidence and assuredness gave the impression that you were every bit as experienced as Sir Roger; you were far gentler, but just as efficient. We are very grateful for that.
In conclusion, serving on this Committee has been a positive first experience for many for us. It was the first time for me in opposition leading on a Bill; it was the first time for my hon. Friend the Member for Barrow and Furness on any Bill; and the first time for my hon. Friend the Member for Feltham and Heston, who only made her maiden speech a few weeks ago. It was the first experience of a Bill for a number of other hon. Friends, too. The Minister said that the Bill has two single parents—no, that it has two parents. That makes it a better child—according to the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith). Notwithstanding that it is a good Bill, we still live in the expectation that it will be even better after Report. If the Government want to accept any of the amendments we put forward and claim them for themselves, we will pleased to support them when the Bill comes back to the Chamber.

Bill, as amended, to be reported.

Committee rose.